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interest rates and option premiums for covered call writing and put-selling

RHO: Why Interest Rates Effect Our Option Premiums

Interest rates and the option Greeks play an important role in understanding option trading basics. Rho, not considered a major Greek, measures the change in an option’s price resulting from a 1% change in interest rates. When interest rates do change, it is normally by 25 basis points, not a full percentage point and that’s [...]

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Ask Alan

Ask Alan #105 – The Impact of Dividends on our Option Premiums

Alan answers a question shared by Bryan, who asks: “What impact, if any, do dividends have on our options premiums when selling covered calls? Thanks.” If you want more “Ask Alan” videos, you can view the archive. More Video: For those new to Alan’s system of Covered Call Writing, be sure to take the Free [...]

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implied volatility and option pricing

Implied Volatility: General Market Conditions That Make Option Values Move Up Or Down

Option trading basics teaches us that selling call and put options is actually selling time value. Time value consists mainly of time to expiration stats and the implied volatility (IV) of the underlying security. Since most of us are selling monthly options, the main distinguishing factor in our option prices is the implied volatility…we are [...]

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Exit strategies for covered call writing

Closing Our Entire Covered Call Position When Share Price Rises: The Mid-Contract Unwind Exit Strategy

Exit strategies or position management is one of the three major components of this strategy we must master to become elite covered call writers. The other two are stock (or ETF) and option selection. In my books and DVDs I mostly focus on scenarios that can result in losses and how to mitigate those losses or [...]

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What I wish for you

Covered call writing has played a major role in allowing me to do the things I want to do when I want to do them. I have been able to devote time to family, friends and my extended family, the BCI community, which I wouldn’t have had the opportunity if not for self-investing with stock [...]

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commissions for covered call writing and put-selling

Evaluating Brokerages And Comparing Their Commissions

Options trade executions include a discussion of the levels of trading approval needed to use various options strategies. You will recall that these defined levels will vary slightly from one brokerage to another. Here is a chart reviewing a sample of these trading levels: In this article, I will review the commission structure of some [...]

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Covered call writing in bear and volatile markets

Emergency Management Report: Dealing with Volatile and Bearish Markets

With the stock market declining over 5% in the past month as a result of geo-political and global concerns exacerbated by the fears of an Ebola epidemic we find ourselves in a position that may lead to “panic” in our investment decisions. The stock market seemed to stabilize a bit on Friday but we are [...]

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how options trades are executed

Options Clearing Corporation: Guaranteeing Our Options Trades

Covered call writing and selling cash-secured puts involves investing our hard-earned money. Did you ever wonder who guarantees these trades? It’s not our broker or even our broker’s clearing firm. It’s the Options Clearing Corporation or the OCC. This is an organization that acts as both the issuer and guarantor for option and futures contracts. [...]

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Ask Alan

Ask Alan #104 – When Should I Close My Position Early If Stock Price Moves Up?

Alan answers a question shared by John, who asks: “I had the opportunity to utilize your premium report for the first time last Monday (8/18). I purchased 100 shares of CAVM and sold one option on that stock. On Friday, I bought back the option and sold the stock. It looks like it was a [...]

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put-selling calculations and strike price selection

“Moneyness” Of Call And Put Options: Understanding Strike Prices

Strike price selection is such a key part of options trading basics and options calculations. There are 3 types of strike prices for both put and call options: in-the-money, at-the-money (and the closely related near-the-money) and out-of-the-money. Moneyness tells option holders whether exercising will lead to a profit.  Moneyness looks at the value of an option [...]

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